Europe Will Disappoint Markets Again: Advisor

The furore created by the UK's decision to veto changes to a treaty last week is just a sideshow and the euro zone has not resolved its underlying issues, Bob Parker, senior advisor at Credit Suisse, told CNBC Monday.

Jonathan Kitchen | Image Bank | Getty Images

European Union Flag

"We will see this week or next whether the pressure on capital markets has been eased but initial evidence suggests markets are going to be disappointed," he said.

"In the short term into next year we are likely to get more interest rate cuts from the ECB (European Central Bank). The bond buying approach is circular. (ECB President) Mario Draghi said he would not increase direct purchases of sovereign bonds and that disappointed markets. The funds available are still inadequate," Parker added.

This view that the underlying problems within the euro zone remain unresolved after last week's summit was echoed by David Marsh, author of The Euro and co-chairman of OMFIF, Official Monetary Financial Institutions Forum. He argued that the UK prime minister had allowed French President Nicolas Sarkozy to "get away with murder" and the euro was more in doubt than ever.

"(David) Cameron should have got his negotiating tactics better under control. He's allowed Nicolas Sarkozy to get away with murder. Sarkozy did not want an "all singing, all-dancing" treaty because that would be about transferring sovereignty," Marsh said.

He added that Cameron had allowed Sarkozy to blame the British and given the French exactly what they wanted all along.

"Tactically it has been a disaster. Britain has been integrated with the euro area since it started. Nothing has changed with this summit, this is a balance of payments crisis at roots there is still enormous current account deficits to be financed," Marsh said.

He went on to dismiss talk of the UK being isolated as "complete rubbish".

"Germany is doing a great deal more trade outside of the euro zone area, whether it's China or Russia. This whole thing about Britain being isolated is complete rubbish," Marsh added.

"Overall Europe is a net creditor but Europe is not a country and so these are not spread around evenly. Of course the idea is to turn Europe into a country and the British people would probably salute that. The problem is they (EU leaders) don't know how to do it," Marsh said.

Edmund Shing, head of European equity startegy at Barclays Capital, questioned whether anyone would care in a few years time that Britain had opted out of a fiscal arrangement.

"The UK has done well staying out of the euro. It will probably outperform in stock market terms in the coming years. It has a huge competitive advantage with a weak currency and more flexible labor markets than the rest of Europe," Shing said.